If you have purchased a residential investment property within the last five years, you would certainly be aware of the tax benefits through claiming Depreciation on such items as carpets, light fittings, hot water installation and white goods etc. In recent years the more astute marketing agents have used depreciation entitlements as a major tool to help illustrate the benefits of a property, and accountants and financial advisors have emphasised the importance of having a professional depreciation schedule prepared by a recognised Quantity Surveyor not only to maximise your claim but to satisfy requirements as set out in ATO legislation.

The ATO have certainly become aware of the growing number of educated property investors claiming depreciation and recognised the need to not only revise the effective life of many items of plant, but to also clarify and more closely define qualifying items of plant that are in fact depreciable, and those items that are considered to be part of the premises and for which capital works deductions may be available.

A concise list of allowable depreciation for residential property issued earlier this year as a “Draft available for comment” on the ATO website reviewing and revising the effective life of these items to take effect from the 1st July 2004 appears as an amendment to Division 40 of the Income Tax Assessment Act.  This list also examines and defines which of those items the ATO consider to be depreciating assets and for which deductions may be available, eliminating any doubt what the ATO will be accepting as a claim in this years' returns. Claiming anything outside these boundaries will certainly give rise to a growing number of audits.